Audit inspects U. contracting practices
In an audit released last week that evaluated the University's financial management practices and contracting, the New Jersey Office of the State Comptroller (OSC) found the University continuously chose the same vendors during its purchasing process, allowing a risk of paying for overpriced services.
Under a current state law, the University's bidding requirements differ from the ones other state departments, agencies and colleges must follow, according to the audit.
"Rutgers' procurement of goods and services generally fails to follow its own stated policies concerning use of a competitive process and unfairly favors incumbent vendors with its ‘single source' procurement methodology," according to the audit.
Some evidence cited that for 16 years the University granted a contract to the same vendor for parking services for its basketball and football games on the basis that such a unique service could not undergo a competitive bidding process, according to the audit.
The audit also claims the University's internal policies restrict competition in the purchasing process regarding capital planning projects by prequalifying contractors separate from the New Jersey process.
The University permits the creation of a vendor and supplier database, according to the audit. Then only the chosen and pre-approved firms are invited for bids, proposals and negotiations for quotes.
"These policies and practices run counter to the ‘basic tenet of public procurement' that unrestricted competition ‘reduces the opportunity for favoritism and inspires public confidence that contracts are awarded equitably and economically,'" according to the audit.
Other than capital planning projects, the OSC found delayed implementation of a 1999 contract meant to install new computer software for the Rutgers Integrated Administrative System (RIAS), a campus-wide administrative system, according to the audit.
A $23.2 million increase to the project raised costs to $35.7 million, but the RIAS is still not complete, according to the audit. Contract management practices contributed to the rise as well as its time extension, and four purchased applications are still not installed.
"Neither available documents nor Rutgers officials we interviewed were able to provide adequate justification for the University continuing to make additional payments to a vendor for work it committed to complete a decade ago," according to the audit.
The audit calls for more appropriate control over the cash-management system and disbursement process, citing that the University is misusing the "quick order" process by purchasing prohibited items and services.
When the University transitioned from a private to a public institution, its charter did not mention its compliance to competitive bidding processes, said Pete McAleer, OSC director of Communications.
"At one point the attorney general tried to enforce that and Rutgers went to court," said McAleer. "The court sided with Rutgers, saying there is nothing under the law that permits them to have to use competitive bidding."
Yet the OSC is asking the University to consider changing its current internal policies, McAleer said. As of 2010, it is the only public university that does not go out to bid, and the OSC is also asking the legislature to change the policy.
"We make 18 recommendations to improve Rutgers' procurement and related contracting processes, to foster competition in the University's selection of vendors and to strengthen controls over the financial management areas we reviewed," according to the audit.
McAleer said the results of the audit mean the University needs to strengthen their contracting procedures and practices, and they are already working to implement 16 of the 18 recommendations.
"Specifically, Rutgers talked about a parking management contract that had been open to competition that had not been open to competition for 16 years. [They] now agreed to advertise and take bids for that contract the next time it goes up for renewal," he said.
The OSC recommended that the New Jersey State Legislature, governor and the University deliberate requiring the University to adhere to the five bidding requirements imposed on other state colleges and universities, according to the audit.
In response to the finding, the University ensured its commitment to its fiscal responsibilities and management procedures, and also accepted the OSC's recommendations from its 22-month review.
"The University's policies and procedures are designed to ensure that procurement activities are conducted in ways that promote competition, equity and fairness while also making sure that Rutgers receives the highest quality products and services at the best possible price," according to a University press release.
The OSC's audit did not find illegal activity during the University's procedures, McAleer said.
"We are also reviewing our policies to make sure that we continue to purchase the best goods and services at the most competitive prices," according to the University's release. "In those instances where our policies may seem unclear, we will modify the language as appropriate."
A series of news articles in the summer of 2008 raised questions regarding the fiscal management and contracting practices in the University's athletic department, McAleer said.
During the 2009 fiscal year, the University's operating expenses were $1.68 billion and its operating revenues were $1.26 billion, resulting in an operating loss $420 million, according to the audit.
"The office undertook preliminary inquiry into the University's financial practices to assess the level of risk associated with those practices to determine whether a full audit would be appropriate," McAleer said. "That risk assessment yielded the determination that an audit was warranted focusing on contract and procurement issues."
The OSC will conduct a follow-up on the University to make sure their recommendations have been met, he said. Usually, the process takes a year.